It is definitely not recommended, but millions of Americans do, in fact, try to live off their Social Security checks.
Perhaps many of these folks are getting the absolute maximum benefits, which currently stand at a rather impressive $4,194. But to receive that amount, one must wait until age 70 to file and have maxed out their contributions for decades.
Most retirees will likely be surprised to learn their monthly checks really won’t fully allow the decades-long retirement that they had dreamed of. In fact, according to the Social Security Administration (SSA), the average Social Security benefit only comes in at roughly $1,600 per month—or about $19,000 a year.
COLA Boost Helpful?
The SSA confirmed last fall that there would be a 5.9 percent cost of living adjustment (COLA) for this year to boost those monthly payments. That is the largest boost to social security in about forty years. The increase is expected to assist beneficiaries during these red-hot high-inflationary times.
However, do be aware that some financial experts who contend this COLA increase might not be all that it is cracked up to be.
“Some retirees on Social Security may be disappointed by the deposit amount they see on the first bank statement of 2022,” Steve Parrish, co-director at the Retirement Income Center, The American College of Financial Services, wrote on Kiplinger. “Others who are just starting their Social Security benefits for the first time may also be in for an unwelcome surprise. The amount they’re seeing may not measure up to what they had been expecting.”
Other Premiums Eat Away at Checks
As for the 5.9 percent COLA increase, Parrish advised to take that good news with a grain of salt.
“That doesn’t necessarily mean you’ll see a larger monthly deposit in your account,” he wrote. “Why? Because most retirees have their Medicare Parts B and D premiums deducted from their monthly Social Security check. This can surprise people in two ways.
“First, Medicare premiums went up in general for 2022, so more will be taken out. The standard monthly Part B premium for 2022 is $170.10, which is a 14.5 percent increase from 2021. … Second, there is an increase in Medicare premiums for those who have higher incomes (the so-called income-related monthly adjustment amount, or IRMAA).”
Parrish then offered up a real-world example of what could go wrong.
“A sixty-eight-year-old woman has seen her Social Security deposit fall from $1,248.50 a month in 2021 to $1,179.20 in 2022,” he wrote. “The culprit is her husband’s successful year in business—which caused their joint income to go up in 2019. (Remember, Medicare premiums are based on your modified adjusted gross income from two years before.) With the good fortune of increased income comes the penalty of higher Medicare premiums.
“Through no fault of her own, she was hit with the IRMAA surcharge. And in her case, the increase in Medicare premiums not only wiped out the 5.9 percent Social Security COLA, but actually dropped her overall monthly payment by $69.30!”
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.